Bitcoin has become known as one of the most sound stores of value in the world. Now, with advancements in the development and proliferation of the Lightning Network, Bitcoin can now be used for one of its original intended use cases: payments.
What is the Lightning Network?
The Lightning Network is a Layer 2 network on top of Bitcoin designed to enable faster, cheaper, and more scalable transactions.
It achieves this by creating off-chain payment channels between parties, allowing multiple transactions to occur rapidly and inexpensively without needing to confirm each transaction individually on the main Bitcoin blockchain.
Transacting on the Lightning Network looks something like this:
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The user holds BTC in a standard on-chain Bitcoin wallet.
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The user creates a Lightning Wallet, which spins up a Lightning node. Using an on-chain transaction, the user funds the wallet by opening a payment channel—this provides outbound liquidity (i.e., there is a balance in the wallet that is available to be sent).
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To receive payments, the user also needs inbound liquidity, which can come from opening channels with other nodes or having channels opened to them by others.
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The user can then create or pay invoices using the Lightning Wallet. These payments occur off-chain and are not recorded as individual transactions on the Bitcoin blockchain.
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While the channel remains open, payments can flow in either direction, limited only by available liquidity.
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When the user is done using the channel, they can close it, and the final balance is settled back on-chain.
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Payments can continue through a channel as long as it remains open and has enough liquidity. To send or receive payments again after a channel is closed, a new one must be opened.
What Isn’t the Lightning Network?
It's important to distinguish that the Bitcoin Lightning Network is not a blockchain. It is a liquidity network that lives on top of Bitcoin, and its transactions occur completely off chain.
Because the Lightning Network relies on payment channels with pre-funded balances, it's not well-suited for users who want to move large amounts of Bitcoin in a small number of transactions. Instead, it’s optimized for use cases that involve a high volume of small-value transactions—making it ideal for scenarios like micropayments, streaming payments, or retail-scale activity.
Why is Lightning Network awesome?
Bitcoin has a lot of positive attributes that have made it what it is today: a trusted store of value. However, having a liquidity network built on top of the underlying blockchain means that new use cases and value propositions can be unlocked. Lightning Network enables:
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Micropayments: Makes transacting small amounts possible on a Bitcoin’s decentralized network
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Privacy: Only settlement transactions are transacted on chain, keeping all transactions on Lightning private
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Speed: Makes payments occur near instantly due to its offchain ledgering
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Low cost: Transactions are not subject to network fees like onchain bitcoin transactions
Using Lightning Network with BitGo
Through BitGo’s partnership with Voltage, a leading provider of Lightning Network infrastructure, clients can access the Lightning Network directly through BitGo APIs, without needing to integrate with additional partners.
With BitGo, there is no need to build some of the complicated infrastructure that is normally required to build and deploy Lightning Wallet for enterprises. BitGo handles the complexity of managing nodes, channels, liquidity, and configuration, and enables you to get started fast with a super simple implementation, that includes:
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Simple APIs to create wallets, send payments, create invoices, and retrieve transaction histories
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Webhooks that notify you instantly about new send and receive lightning payments, and transactions
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Fully integrated into BitGo’s wallet infrastructure which includes transfers, policies, and user permissions
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Easy to understand documentation on our developer portal
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Node configuration, liquidity, and channel management automatically managed by Voltage
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Create self-custody or custody Lightning wallets to serve your use case
Secure, Scalable Bitcoin Payments
Lightning Network on BitGo aims to make Bitcoin practical for everyday transactions, enabling micro-payments and enhancing usability, without sacrificing Bitcoin’s underlying decentralization or security.
Combining Lightning Network with BitGo’s institutional-grade security and process controls with scalable, low-cost global bitcoin payments, is a step towards the future of digital asset payments.
To learn more about implementing Lightning Network with BitGo, get in touch.
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BitGo is the leading infrastructure provider of digital asset solutions, delivering custody, wallets, staking, trading, financing, and settlement services from regulated cold storage. Since our founding in 2013, we have focused on enabling our clients to securely navigate the digital asset space. With a large global presence through multiple regulated entities, BitGo serves thousands of institutions, including many of the industry's top brands, exchanges, and platforms, as well as millions of retail investors worldwide. As the operational backbone of the digital economy, BitGo handles a significant portion of Bitcoin network transactions and is the largest independent digital asset custodian, and staking provider, in the world. For more information, visit www.bitgo.com.
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